Power of Sale vs Foreclosure in Ontario: What Homeowners Behind on a Mortgage Should Know
Falling behind on a mortgage is stressful, and the vocabulary makes it worse. People search for "how to stop foreclosure in Richmond Hill", but in Ontario true foreclosure is rare. What most homeowners actually face is power of sale. The two processes work differently, run on different timelines and leave you in very different financial positions. Understanding which one you are in, and what your options are at each step, gives you more control than you might think.
This article is general information, not legal advice. If you have received a demand letter or a Notice of Sale, speak with a real estate or debtor-side lawyer right away. If cost is a concern, Legal Aid Ontario and community legal clinics can point you to help.
Power of sale in plain terms
Power of sale lets a mortgage lender sell your home, without a court order, to recover what is owed after you default. Almost every Ontario mortgage contains its own power-of-sale clause, and Part III of the Mortgages Act sets the minimum protections (Mortgages Act, R.S.O. 1990, c. M.40 (ontario.ca e-Laws, accessed Oct 2026)):
- The lender cannot serve a Notice of Sale until the default has continued for at least 15 days (section 32).
- The lender cannot sell until at least 35 days after the notice is given (section 32). This window is often called the redemption period.
- If a mortgage has no power-of-sale clause, the statutory power under Part II applies only after three months' default, with 45 days' notice (section 26).
During the notice period the lender is restricted from taking further steps such as suing or taking possession. You can generally put the mortgage back in good standing by paying the arrears plus permitted costs. Even after the notice period, you can usually redeem by paying what is owed up until the lender signs a firm sale agreement.
If the lender sells, the proceeds pay the mortgage, interest, the lender's legal and selling costs, and then any other registered debts. Any surplus belongs to you. If there is a shortfall, the lender can sue you for the difference.
Foreclosure in plain terms
Foreclosure is a court process in which the lender asks a judge to transfer ownership of the property to the lender, ending your equity of redemption. It is slower and more expensive for the lender, and if the lender takes the property through foreclosure it generally gives up the right to sue you for any shortfall, but it also keeps any equity. Because power of sale is faster and lets lenders recover their full debt, foreclosure is uncommon for residential mortgages in Ontario.
Side-by-side comparison
| Power of sale | Foreclosure | |
|---|---|---|
| Court needed? | No (unless contested) | Yes |
| Typical use in Ontario | Most residential defaults | Rare |
| Who gets surplus equity | The homeowner | The lender keeps the property |
| Can lender sue for a shortfall? | Yes | Generally no |
| Timeline | Often a few months | Often longer, through the courts |
A typical power-of-sale timeline
- Missed payment(s). The lender calls or writes. This is the cheapest point to solve the problem.
- Demand letter. Usually from the lender's lawyer, setting out arrears and costs.
- Notice of Sale after at least 15 days of default, served on you and others with registered interests.
- 35-day redemption period (plus extra days if served by mail).
- Possession and listing. If not resolved, the lender may seek possession and list the property.
- Sale and accounting. The lender must account for proceeds. You are entitled to any surplus.
Lawyers commonly describe an uncontested power of sale as taking several months from first default to closing, but every file is different.
Your options, earliest first
1. Talk to your lender early
Federally regulated banks are expected to work with borrowers in difficulty. The Financial Consumer Agency of Canada lists options such as payment deferrals, extended amortization, special payment arrangements and interest-only payments, while noting that relief can increase the total interest you pay (Financial Consumer Agency of Canada, Mortgage relief options (accessed Oct 2026)). Lenders generally prefer a workout to a sale.
2. Refinance or bring in a second mortgage
If you have equity, a mortgage broker may be able to refinance the arrears. Read the costs carefully; private lending can be expensive and does not fix an underlying cash-flow problem.
3. Sell on your own terms
If keeping the home is not realistic, selling it yourself before the lender takes possession usually preserves more equity than a lender-run sale: you control preparation, pricing and timing, and you avoid some of the enforcement costs that are deducted from your proceeds. Our guides on pre-listing prep for Richmond Hill sellers and staging on a budget cover how to prepare quickly without overspending. Your lawyer can ask the lender for time to complete a sale.
4. Get legal and credit advice
A lawyer can check whether the Notice of Sale was properly served and calculated. A licensed insolvency trustee can explain whether a consumer proposal or other option fits your overall debts.
What to watch out for
- "We buy houses fast" offers well below market value, especially ones that ask you to sign over title or a power of attorney.
- Equity-stripping lease-back schemes that promise you can stay and buy back later.
- Ignoring mail. Deadlines in a Notice of Sale run whether or not you open it.
Every situation is different, and nothing here can promise a particular outcome. The earlier you act, the more choices you usually have.
Frequently asked questions
What is the difference between power of sale and foreclosure in Ontario?
With power of sale, the lender sells the home without a court order and any surplus after paying debts and costs goes to the homeowner. With foreclosure, a court transfers ownership to the lender. Power of sale is far more common in Ontario.
How long after missing a payment can an Ontario lender start power of sale?
Under section 32 of the Mortgages Act, a Notice of Sale cannot be given until the default has continued for at least 15 days, and the sale cannot happen for at least 35 days after the notice.
Can I stop a power of sale?
Generally yes, by paying the arrears and permitted costs during the redemption period, or by paying what is owed before the lender has a binding sale agreement. Speak with a lawyer about your specific situation.
Do I get the money left over after a power of sale?
Yes. After the mortgage, interest, the lender's costs and other registered debts are paid, any surplus belongs to the former owner. If there is a shortfall, the lender can pursue you for it.
General information only, not legal, tax or financial advice. Figures were checked against the sources linked above in October 2026 and can change; confirm your own numbers with your real estate lawyer, accountant or lender before you sign anything.
Farshad Fazaeli, Salesperson, International Realty Firm, Inc., Brokerage, 647-667-5555 · Richmond Hill, ON
Richmond Hill & GTA · International Realty Firm, Inc., Brokerage
647-667-5555 · info@melk.ca